Price Fixing Cause for Alarm?

Published: August 31, 2004, By Corey M. Reardon, AWA Alexander Watson Assoc.

Not for the first time, the European paper industry is the focus of a European Commission (EC) investigation into alleged price fixing and cartel activity.

The scope of the investigation was not limited to one paper type but covered virtually everything from newsprint to label stock.

The list of companies raided more or less simultaneously in May/June by EC investigators includes all the major names. Now the investigation has spread to the US, with many of the same companies also raided by the US Dept. of Justice's Antitrust Div.

While this investigation seems to cast a shadow over the industry, the reality of the actual situation is hardly cause for alarm. Pulp and paper prices have been at a very low level across the globe and across all areas of paper usage — from magazines to cartons to labels — but are experiencing upward movement in today's environment.

Other raw material costs also are rising and were doing so even before the pressures introduced by oil and the cost implications of its current volatility.

In this situation, it is inevitable every individual company involved in the paper and converting industry would be looking for a price increase, and each of those surely would be seeking to achieve a competitive pricing advantage over companies in similar segments in what largely is a commodity market.

AWA Alexander Watson Assoc. is an international market research consultant company for the converting and packaging industries.